Archive - Mar 16, 2015

This is the short-term scenario. The longer-term scenario is that the market is prime for a sizable collapse.

In his fiercest rhetoric yet, Germany's angry Finance Minister Wolfgang Schaeuble unloaded at a CDU event today:

SCHAEUBLE SAYS DOESN'T KNOW WHAT TO DO WITH GREECE NOW, NEW GREEK GOVERNMENT HAS DESTROYED ALL THE TRUST THAT HAD BEEN REBUILT

He went on to explain that "no one I talk to sees how Greek approach can work," which perhaps explains why Greek 3Y bond yields spiked back above 20% for the first time since the election today.

Santander, fresh off the largest auto repossession-related settlement in history, finds voracious demand for a $712 million ABS deal backed by loans made to buyers classified as "deep" subprime.

The transparent truthlessness of the Fed’s basic premises go far to explain the chasm between official policy and reality - though it does not explain the appetite for plain lying of the supposedly informed minority cohort of the public, the deciders among us in business, politics, and media. Within th enext few months (between "patient" removal, token rate hikes, and reversals to QE4), the Fed will be completely out of cred. This will be the biggest disaster of all, since the loss of faith in august institutions will rage through every polity in the advanced economies. Nobody will believe any longer in anything they say or do, and especially the value of the papers (or digits) they denominate as money.

Reminiscent of the "QE Trade", stocks and bonds are surging and the USD dumping this morning as yet more terrible data spurs 'hope' that The Fed will stay lower-er for longer-er and lose all credibility for good. The Dow is now 350 points off Friday's lows (even as oil collapses) on nothing but disastrous data and Treasury yields are 5-6bps lower than the late Friday pop highs. The USDollar is down an impressive 0.75% since Friday as Crude hovers just above a $42 handle.

It was a tough weekend (again) for Greece's embattled FinMin Yanis Varoufakis. After walking out on a CNBC interview when asked if he was a liability (after his photo shoot caused a storm in Greece), a video surfaced showing the outspoken minister giving the middle finger to Germany saying "solve the problem yourself." He has come out swinging this morning, as The Telegraph reports, Varoufakis exclaims, "That video was doctored. I've never given the finger, I've never given the middle finger ever." However, the user who uploaded it to YouTube denied it was a fake and, based on The Telegraph's poll, 67% believe Varoufakis did it. Furthemore, the German talk-show that aired the clip has confirmed "no evidence of manipulation or falsification," and, for the first time, a majority of Germans now want Greece out of the union.

Unlike the Fed, the ECB's Q€ program is far more opaque, far more ad-hoc, and far more improvised (and at the rate it is soaking up already negligible collateral as JPM explained yesterday, soon to be far more abbreviated). In fact, without a daily POMO preview (such as what the Fed used to provide) nobody has any idea what is going or what the ECB will be buying until a week after the fact. Today, for the first time, the ECB provided the bare minimum data on its "Public sector purchase program" i.e., how much debt it had purchased in the first week of the ECB's QE. The answer: only €9.8 billion.

Moments ago, soothing words by Saudi Arabians notwithstanding, both Brent and WTI, had another step move lower, with Wext-Texas Intermediate sliding under $43, a fresh 6 year low, and well below the January lows of $44.37! What may be causing it: well, aside for "more sellers than buyers", and a rumor that Genscape reporting another major inventory build at Cushing, a breach of a key support line may be the reason. BofA explains.

Homebuilder Sentiment tumbled for the 2nd month to October lows, missing expectations for the 3rd month in a row, as buyer traffic and sales expectations both fell. The weather-crushed Midwest saw sentiment surge from 48 to 61 and the sun-soaked home-sales-destroyingly warm West region saw sentiment collapse from 64 to 53.

Jughead versus Hildebeast...

The prospects of a rate hike by the Fed are looking increasingly shaky and downright laughable, not just because the start to 2015 for the US economy has been the worst in "negative surprises" terms since Lehman, or because the Atlanta Fed Q1 real-time GDP forecast is about to go negative (consensus originally expected this print to be 3.5% if not higher), but because the last time this happened, the Fed launched QE2. What is "this"? Bank of America explains.

Along with a massive revision for January (from +0.2% to -0.3%), February's Factory Output fell 0.2% (missing expectations for the 3rd month in a row). This is the 3rd drop in a row for factory output - the worst run since 2009. Overall industrial production missed for the 3rd month in a row but managed a meager 0.1% rise on the back of the biggest rise in utility output ever. Auto vehicles and parts production tumbled 3.0% MoM.

When lying is no longer enough to gain compliance, then the organs of security are unleashed on dissent and resistance.

After disappearing for ten days from the public's eye, theories surrounding his absence ranged from the tabloidy (fathering a baby with a Russian gymnast), to the trivial (lower back issues), to the bizarre (another putsch in the Kremlin), to the idiotic (dead). All that can be cast aside when moments ago we saw with our own eyes that the Russian president simply wanted some time away and has now reappeared for his meeting with the Kyrgyz president.  But while Putin may have kept a low visibility profile, he was very well heard, and as reported earlier today, the Russian president ordered nearly 40,000 troops in northern and western Russia to be put on full alert early Monday as part of snap-readiness exercises.

This week's main event will be the FOMC announcement on Wednesday at 2:00 pm and the subsequent press conference, the conclusion of the March 2-day Fed meeting, in which it is widely expected that Yellen will announce the end of the Fed's "Patience" with an economy in which resurgent waiters and bartenders continue to skew the job market even if it means consistently declining wages for 80% of the US labor force. Here is a summary of what else to expect this week.